Inflation and Deflation

One of the spooky words kicked around by stock market watchers during the last few months has been deflation. It conjures up the idea of people standing in bread lines during the Great Depression, or people in rags warming themselves around rusted barrels of burning garbage in shanty towns. Clearly, deflation is something to fear if it's extreme, with prices falling sharply on many items, and businesses coping by dumping employees. During the Depression, prices spiraled down for nearly four years. The most recent deflationary trends in Europe and China have fueled concerns. In January, U.S. data hinted at the issue, as this country's economy was held back by stresses in the...

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